June natural gas was set to open Friday slightly lower at around $2.808/MMBtu, with the market continuing to mull the implications of Thursday’s leaner-than-expected Energy Information Administration (EIA) storage report.

EIA reported an 89 Bcf injection into Lower 48 gas stocks for the week ending May 4, versus consensus estimates for a build in the low- to mid-90s. Aided by the bullish surprise, the June contract surged 7.7 cents Thursday to settle at $2.814.

Thursday’s rally “demonstrates that bullish sentiment is not dead yet,” EBW Analytics Group CEO Andy Weissman told clients Friday. “Coming one week after EIA reported an injection 7-8 Bcf higher than expected, a 1-3 Bcf smaller-than-forecast injection is not sufficient, by itself, to explain the renewed rally.

“Traders who focus on the huge current storage deficit, however, interpreted yesterday’s storage miss as an indication that the next several injections might also be smaller than expected,” Weissman said. “This expectation is not likely to be fulfilled. Our storage model indicates that, from a supply/demand standpoint, market expectations for the past two injections were misplaced.”

EBW’s model shows the next several EIA storage injections clocking in north of 100 Bcf, a scenario made more likely if Thursday’s rally is sustained given the potential for higher natural gas prices to reduce coal displacement in the power stack, according to Weissman.

“The market was more than 2.0 Bcf oversupplied on a weather-adjusted basis,” analysts with Tudor, Pickering, Holt & Co. (TPH) said of this week’s storage number. “With U.S. production flat week/week,” liquefied natural gas “exports down about 0.4 Bcf/d and Mexican exports inert at around 4.4 Bcf/d, domestic demand remains strong.

“Initial estimates are predicting more” cooling degree days than heating degree days, “indicating that more demand is on the horizon,” the TPH analysts said. “All-in, the supply deficit is proving to be more resilient than initially expected.”

Genscape Inc. analyst Eric Fell noted that Thursday’s EIA number came in about 9 Bcf below the firm’s estimate, which had been higher than survey averages. The winter months also rallied Thursday “so that a $3 handle is back on CME’s board (January 2019) for the first time in about two weeks.

“This week’s storage report was driven in part by total degree days for the week running close to the five-year average (a rarity so far this year),” Fell said. “When compared to degree days and normal seasonality, the reported 89 Bcf injection appears loose by 0.7 Bcf/d versus the prior five-year average.

“…Recall that last week’s build, however, was 7 Bcf and 11 Bcf above our number and the survey average, so there may have been some truing up this week.”

NatGasWeather.com said the overnight weather data offered “mixed trends, with a few datasets adding marginally more demand, while others are little changed.

“Overall, we see the data adding a little more demand over the past several days as a few days are slightly hotter and a few a little colder, thereby trending weather sentiment from bearish to neutral to slightly bearish,” the firm said. “It’s still a mostly comfortable pattern apart from being hot at times over the southern U.S., and slightly cool across the northern U.S.”

June crude oil was set to open Friday near even at around $71.35/bbl, while June RBOB gasoline was trading fractionally lower at around $2.1869/gal.